The Proposed National Sovereign Wealth Fund

ONE of the resolutions at the last National Economic Council was the decision to replace the so-called Excess Crude Account (ECA) with a Nigerian National Sovereign Wealth Fund (NSWF). The Council is to discard the ECA because it realised that it has no backing in law and is now acknowledged to be a mere expedient arrangement employed from a previous era to keep savings off the rising crude oil prices.
He Economic Council expects the Ministers of Finance, National Planning and the Attorney General to finalise the setting up of the Nigerian Sovereign Wealth Fund within three months.

It should be of interest to Nigerians to ascertain how this revision by the very same council, whose composition from the inception of the Excess Crude Account is largely unaltered, came about. Essentially, it has conceded to the illegality of the Account and acknowledged its twin vices of prodigality and arbitrariness.

This same Council has shared out over $50 billion from the ECA and it may be argued that over the years the timing and dynamics of accessing the Account ranged from opportunism to outright fiscal policy indiscipline. The Council must have encountered a vision so sudden and entered a conviction to disown the lucrative ECA practice with this unusual speed.

This somersault, in the context of public policy formulation in our country and its implementation may not be the classic example of the triumph of good over evil, but with the elevation of the initiative and the bluster accompanying it, we should add that the somersault may give us one of the better examples in recent times, of how top level policy makers proffer self serving and inferior arguments to suit the flavour of the moment

Sovereign Funds and Infrastructure Funds may be chalked down as two of the extraordinary vehicles that impacted on high finance in many regions and socio-economic sectors especially since the 1990s.We are regretfully reminded that Nigeria is the only OPEC country without a sovereign investment vehicle. Yet, our administrators and technocrats have taken residence at OPEC headquarters for decades and such best practice remained alien to our Government.

For a start then, Nigeria is arriving very late to the concept of institutionalised saving within a global economy. Perhaps, the three months work programme is to enable policymakers assimilate the magnitude of the initiative. That too, is unfortunate as the current Minister of National Planning, who was Minister of Finance in our recent past, is on record for saying that this same Council discussed this initiative ‘about two years ago”. Our lateness is therefore endemic.

In discussing the journey towards an NSWF, it may best be situated in our movement as a country and an economy that has retrogressed in the immediate past and faces a very tough future in a hostile global environment. A few snippets would illustrate our missed opportunities:

In 2007, Nigeria had a balance sheet of massive foreign exchange reserves in excess of US$60 billion against a backdrop of extinguished internal debts and sovereign ratings, scored and un-scored were upbeat. All the major financial institutions sought a toehold in the economy as banking capitalisation was considered a successful programme. The political actors then were not as and blatant poorly behaved, the sectarian killings were not in the memory and then the civil wars in the creeks were contained.

We do not expect the NSWF would be a closed end fund with Nigeria’s so-called ‘excess crude” accounting as its sole subscriber. That would be very petulant and short of imagination. A second aspect therefore of the NSWF is to seek out other bilateral and multilateral investors to join the pool and multiply the flow of funds to its dedicated market channels which we presume to be the Infrastructure sector. We are aware that our poor behaviour in corporate governance, a strong stigma of corruption in high places and the prognosis of Nigeria imploding faster than we wish are all critical factors against the initiative.

Today, on the eve of inaugurating an NSWF, the internal and external ratings are perversely unflattering. Yet, we believe that these are not enough challenges to derail the belated initiative. The NSWF is so long overdue to stem the unbridled instant gratification organised by all the tiers of our Government. It is unconscionable that trillions of money and resources have not been saved up for infrastructure rehabilitation or as, usually the practice, as counterpart funding for infrastructure entrepreneurs who may see beyond the current Nigeria credit rating.

Whereas, it is well known that Nigeria missed the opportunity of a Fund launch when we had the necessary and even sufficient conditions for success, we make bold to assert that the depth of opportunities within the Nigerian economy, paradoxically as a result of our leadership deficit, are of investible grade when we sit up to abide with international rules. As manifested in our well applauded trans-border debt payments, we were obliged to put up with the world’s best practices and practitioners.

In seeking Fund managers, custodians, auditors etc for the NSWF, must do away with those professional middle men and hangers, bureaucrats in our public service and the elements of the political class who generate odium that worsen our chronic deficiencies. Else, this NSWF would amount to a wicked irony: a belated and false start in a world that has left us stranded in poor infrastructure and squandered riches.

The Nigerian people are in agonising search for public servants to trust with their patrimony. It may well be that the organisation of the NSWF may introduce persons as trustees who will preside over the death of the Excess Crude Account as a Government-authorised money sharing puzzle and midwife a fund whose transparency, liquidity and redemptive value will accentuate the national interest and imitate the Kuwaiti fund for instance. Let the initiative be sped up.

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